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Canada’s commercial rent relief program begins as pressure mounts on landlords

Click to play video 'Coronavirus outbreak: Trudeau says applications open now for rent relief' Coronavirus outbreak: Trudeau says applications open now for rent relief
WATCH: Trudeau says applications open now for rent relief

Calls to improve emergency measures for Canada’s small business owners feeling squeezed by the coronavirus pandemic have grown over the last few weeks.

Many businesses deemed non-essential have struggled to pay rent since March. While the Canadian Emergency Commercial Rent Assistance (CECRA) program is officially open, many businesses have raised concerns that their landlords won’t participate.

Prime Minister Justin Trudeau implored landlords to apply for the program shortly after it opened Monday morning.

“To landlords: please apply. And to business owners, make sure you’re holding up your end of the bargain, as well.”

READ MORE: Commercial rent relief plan gave businesses hope, but landlords reluctant to participate

The CECRA program allows landlords to apply for government aid to cover half of rent payments for small businesses, for up to $50,000 a month. While tenants are expected to pay 25 per cent under the agreement, landlords would forfeit the remaining 25 per cent.

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Landlords with up to 10 eligible tenants in the Atlantic, British Columbia, Alberta or Quebec could apply as of 8 a.m. Monday. Landlords in Manitoba, Ontario, Saskatchewan and the territories can apply Tuesday. The program will open to those with more than 10 commercial tenants later in the week.

Trudeau said the program will help businesses “stay in their spaces” as the country works to restore the economy.

In Ontario, where more than a million small businesses are concentrated, concerns from owners about paying rent have grown particularly loud.

Owners, politicians and advocates alike have pleaded Premier Doug Ford to ban commercial evictions while public safety measures remain in place, forcing businesses to stay closed. While it’s something the province has the power to do, Ford has avoided the measure thus far, leaning on the Ontario-Canada Emergency Commercial Rent Assistance Program as the solution for the time being.

Click to play video 'Some landlords won’t apply for new rent assistance program' Some landlords won’t apply for new rent assistance program
Some landlords won’t apply for new rent assistance program

But the growing frustrations recently drew a new tone from Ford. He suggested that he would crack down on commercial landlords who aren’t offering leniency to their tenants.

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“Don’t push me,” he said. “These big landlords want to take advantage of small little companies and people that are struggling? I’m going to come down on them like they’ve never seen before.”

It’s rare, but the Ford government could do quite a lot if it chose to intervene, said Carissima Mathen, a law professor at the University of Ottawa.

Depending on what he wanted to do, any moves made by Ford would first have to be put through the Assembly of Ontario to have legislation passed, she said, but it’s possible.

“The government might try and provide a disincentive for landlords against not participating in the rental program, for example, or putting a moratorium on commercial evictions and also putting a limit on how much rent would be owing,” she told Global News.

“They can do a fair bit. It’s obviously a serious matter. You want to ensure that you don’t cause too much disruption on the commercial arrangements and the commercial tenancy system… You have to be cognizant of other consequences.”

Mathen said Canada doesn’t have specific property protections in the Constitution, but the complications that follow such an intervention would need to be considered carefully.

“If they see that there’s a risk of businesses going under, then they may feel the need to intervene,” she said. “It’s a serious thing for any government to consider.”

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READ MORE: Commercial landlords offer rent deferrals as coronavirus shutters stores

Ford hasn’t elaborated on what he would do to “come down” on landlords should small business owners still feel stung after the CECRA rolls out. But that sort of warning to landlords discounts the struggles they’re going through, said Laura Jones, executive vice-president and chief strategic officer of the Canadian Federation of Independent Business (CFIB).

“It’s making landlords the kind of cartoon villains. Don’t get me wrong, there are some bad landlords, but there are also bad tenants. Everyone’s got bills to pay,” she said.

Jones said the CFIB has heard from a landlord whose tenants have been hit particularly hard. The landlord purchased a building two years ago and while he’s going to apply for the CECRA to help them, he’s also worried about losing his own business.

“He can’t really afford it. He’s had to dip into his RRSP to make it happen,” she said. “There’s a lot of stress for these landlords as well. In some cases, they’re not getting a break.”

For landlords to qualify for the CERCA, tenants must be closed temporarily or have experienced at least a 70 per cent drop in revenue compared to the same time last year.

Click to play video 'Feds unveil forgivable loans for landlords participating in CECRA' Feds unveil forgivable loans for landlords participating in CECRA
Feds unveil forgivable loans for landlords participating in CECRA

It’s requirements like this that have deterred some landlords from the program so far, said Jones, adding that it’s one of many “unanswered questions” in the program. She said 40 per cent of CFIB landlord members have reported that they will not apply.

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“What if my tenant tells me they’re 70 per cent down, but they’re not? Then who is liable for that?” she said.

“Then, what do I do as a tenant if I desperately need help but my revenue’s down 68 per cent or 50 per cent, not 70 per cent? You’re still in a pretty desperate situation there, too.”

Since the CECRA only recently came into play, many landlords have likely already chosen to continue with the rent deferral programs they’ve set up with their tenants as far back as March, said Lisa Borsook, executive partner with WeirFoulds LLP in Toronto, who specializes in commercial leasing and development. She said this further complicates matters as the program opens.

“Deferral agreements can be easier to administer since they’re not necessarily forgoing the balance of the rent amount that’s not being paid by the program,” she said, adding that this has been particularly common in the retail context.

“There has been a process of mutual co-operation since the beginning of April for many landlords. The program doesn’t say if you made plans you can’t participate, but it has the effect of unwinding those arrangements.”

The CECRA is not mandatory. Landlords are not required to apply for the program or reduce the rent payable by tenants. The program ultimately offers landlords and tenants an alternative arrangement method.

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READ MORE: 61% of Toronto businesses would close down in 3 months, survey says

While Ford never hinted at the possibility of making the program mandatory, Borsook said it could be within his reach — though it would only exacerbate the existing concerns.

“Some of the problems associated with the program are legitimate concerns. So if you go and make the program mandatory, all those same issues still exist,” she said.

“I suspect that the program, when it was created, was a compromise between different competing interests. If you go and make that compromise mandatory — it doesn’t sound like a good idea to me.

According to the Canada Mortgage and Housing Corporation, which administers the program on behalf of all levels of governments, property owners are not allowed to recover rent abatement amounts once the program is over. Payments to landlords should arrive in time for June 1, the CMHC said.

The CFIB and others have asked for amendments to the program to better assist both sides of the coin.

Borsook said the country’s appetite for the program won’t be clear for a while and that it will likely be skewed depending on where the applications are coming from.

“There’s a mantra in real estate is ‘location, location, location,'” she said.

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“All the concerns landlords in Toronto have expressed may be insignificant to the risks associated with a landlord in another area of Canada not participating in the program. We might need to hold our breath and see what happens.”

— with files from the Canadian Press and Global News’ Hannah Jackson